Innovation will happen where the money is. Also, the production will happen where people/government are ready to invest the billions of dollars needed.
Both look grim for the moment in europe. Don't really see any company in the EU with the resources to build the 450 mm wafer fabs that's coming in the next ten years or so.
I'm not afraid that we'll stop producing good scientific results. IMEC, Fraunhofer and the rest of the institutes are world class enough for that. I'm afraid that we will continue developing stuff that is either bought up by american companies before take-off or commercialized in Asia instead.
One reason that europe lags behind is that we in a way are too close to the US culturally and economically. People with good ideas go from europe to silicon valley or are pretty ready to sell their companies to the more established american ones. Sometimes it feels like europe is the equivalent of farm teams in the NHL. Create talent that's later used by other teams.

China certainly has a lot of forward momemntum going for it right now and the results of the survey are surprising. Back in 1985 we heard the same about Japan ( anyone remember all the hoopla about "Fifth Generation Computing" ) till they went soft ( a lack of enough Mathematicians and PhDs in general ) and the Tokyo land bubble sucked oxygen out of them. China is still a Command Economy with its impact seen most in Academia and R&D. Great for catching up with the Joneses but not fertile ground for innovation

Even when you add silk, hand-pulled noodles tea, ceramics, the abacus or ocean going junks ( of the Chen Ho type ) thats still not much for such a large & independent nation with such a long history ( 5,000 years !). Tiny Italy produced more ( by couple orders of magnitude ) innovations during just the 200 years of the Renaissance ( and no they did not have to wait for Marco Polo to bring back Pasta or Ice Cream from China - they had developed them on their own ). Recently there has been a concerted effort among the third-rate academics in the West ( seem to be concentrated particularly in the UK - with their tradition of toadying & fraud now exposed by the News of the World & Barclays scandals ) to give credit to the Chinese for inventing just about everything in order to curry favor with them. These need to be taken with a grain of salt.